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Study: China Loaned More Than World Bank

The World Bank issued a little over $100 billion in loans between the middle of 2008-2010, according to research done by the Financial Times. The China Export Import Bank and China Development Bank, on the other hand, loaned at least $110 billion to developing countries during the same period. From the BBC:

The Chinese lenders are so-called policy banks – they have a mandate to further whatever Beijing sees as its national interest. One of China Development Bank’s specific tasks is to try to alleviate and, where possible, eliminate bottlenecks in supplies of raw materials or land for China’s economy. It also tries to open up foreign markets for Chinese companies.

Chinese banks were offering loans to producers of raw materials at a time when it was hard for them to attract financing from elsewhere. That helped secure long-term energy deals, including oil supplies from Russia, Venezuela and Brazil.

The BBC report doesn’t include International Monetary Fund lending, which is at least $50 billion. The point is not that China is lending more than the West–it’s not–but that China is a major lender, and it is using lending to gain strategic advantages and global power. It is, for lack of better words, one of China’s primary global ascension strategies.

One reason China’s economy remained robust during the Great Recession is because Bank of China and ICBC loaned money under central government direction to get liquidity into the system. That was undoubtedly good for the economy, but it wasn’t great for investors who will have to deal with years of rising non-performing loans.

Speaking of investment, Rein also mentioned that many big Chinese companies have serious transparency issues, and investing in them directly is a very risky proposition. And the BBC article noted that Chinese companies are still reluctant, or flat-out not allowed, to take part in much foreign direct investment.

This tells me that China, while pursuing a global economic strategy similar to the one that helped the West gain political power, is still hamstrung when it comes to being fully open for international business. It’s premature to call China the global power for this reason. Rather, it is on a tempered, politically-moderated ascent.